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b . Suppose you are considering two possible investment opportunities: a 1 2 - year Treasury bond and a 7 - year, A - rated
b Suppose you are considering two possible investment opportunities: a year Treasury bond and a year, Arated corporate bond. The current real riskfree rate is and inflation is expected to be for the next years, for the following years, and thereafter. The maturity risk premium is estimated by this formula: MRP The liquidity premium LP for the corporate bond is estimated to be You may determine the default risk premium DRP given the company's bond rating, from the following table. Remember to subtract the bond's LP from the corporate spread given in the table to arrive at the bond's DRP Corporate Bond Yield tableRate,Spread DRP LPUS Treasury,AAA corporate,
b Suppose you are considering two possible investment opportunities: a year Treasury bond and a year, Arated corporate bond. The current real riskfree rate is and inflation is expected to be for the next years, for the following years, and thereafter. The maturity risk premium is estimated by this formula: MRP The liquidity premium LP for the corporate bond is estimated to be You may determine the default risk premium DRP given the company's bond rating, from the following table. Remember to subtract the bond's LP from the corporate spread given in the table to arrive at the bond's DRP
Corporate Bond Yield
tableRate,Spread DRP LPUS Treasury,AAA corporate,
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